It is a pleasure to report that the Sino Oil and Gas Holdings Limited (HKG:702) is up 47% in the last quarter. But that doesn't change the fact that the returns over the last three years have been stomach churning. In that time the share price has melted like a snowball in the desert, down 92%. Arguably, the recent bounce is to be expected after such a bad drop. But the more important question is whether the underlying business can justify a higher price still.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
View our latest analysis for Sino Oil and Gas Holdings
Sino Oil and Gas Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over three years, Sino Oil and Gas Holdings grew revenue at 6.1% per year. Given it's losing money in pursuit of growth, we are not really impressed with that. Nonetheless, it's fair to say the rapidly declining share price (down 58%, compound, over three years) suggests the market is very disappointed with this level of growth. While we're definitely wary of the stock, after that kind of performance, it could be an over-reaction. Of course, revenue growth is nice but generally speaking the lower the profits, the riskier the business - and this business isn't making steady profits.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
Sino Oil and Gas Holdings provided a TSR of 0.7% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 38% endured over half a decade. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 5 warning signs for Sino Oil and Gas Holdings (2 shouldn't be ignored!) that you should be aware of before investing here.
But note: Sino Oil and Gas Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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January 28, 2020 at 09:21AM
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Easy Come, Easy Go: How Sino Oil and Gas Holdings (HKG:702) Shareholders Got Unlucky And Saw 92% Of Their Cash Evaporate - Yahoo Finance
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